W’Bank Revises Nigeria’s Growth Projection for 2023, 2024 Downward to 2.9%

•Says rising global commodity prices, underperforming oil sector may slow country’s growth

Nume Ekeghe in Lagos and Emmanuel Addeh in Abuja

The World Bank Group has downgraded Nigeria’s growth projection for 2023 and 2024 to 2.9 per cent, as against the 3.1 per cent it had predicted for the country in June 2022.

The Washington-based institution made the projection in its latest Global Economic Prospects (GEP) released yesterday.

The bank noted that the downgrade was a result of the underperforming oil and gas sector, insecurity, floods, and rising production costs.

 Also, the Sub-Saharan Africa (SSA) growth for 2023 was revised to 3.6 per cent a 0.2 percentage point downward revision from the June forecast. However, the region’s growth was expected to accelerate to 3.9 per cent in 2024.

 It stated: “Growth in Nigeria, the region’s largest economy weakened to 3.1 percent in 2022, a 0.3 percentage point downgrade from the June projection. Oil output dropped to 1 million barrels per day, down by over 40 per cent compared to its 2019 level, reflecting technical problems, insecurity, rising production costs, theft, lack of payment discipline in joint ventures, and persistent underinvestment, partly because of the diversion of oil revenues to petrol subsidies, estimated at over two per cent of GDP in 2022.”

It states that a strong recovery in non-oil sectors moderated in the second half of the year as floods and surging consumer prices as annual inflation surpassed 21 per cent for the first time in 17 years disrupted activity and depressed consumer demand.

 “Persistent fuel and foreign exchange shortages, with the naira depreciating by over 30 per cent last year in the parallel market, further dampened economic activity. In Nigeria, growth is projected to decelerate to 2.9 per cent in 2023 and remain at that pace in 2024 barely above population growth.

“A growth momentum in the non-oil sector is likely to be restrained by continued weakness in the oil sector. Existing production and security challenges and a moderation in oil prices are expected to hinder a recovery in oil output.

“Policy uncertainty sustained high inflation, and rising incidence of violence are anticipated to temper growth. Growth in agriculture is expected to soften because of the damage from last year’s floods.

“As fiscal position is expected to remain weak because of high borrowing costs, lower energy prices, a sluggish growth of oil production, and a subdued activity in the non-oil sectors.”

On the projected growth for the region, the bank stated: “Growth in SSA is projected to edge up in 2023 to 3.6 per cent a 0.2 percentage point downward revision from the June forecast—before picking up to 3.9 per cent in 2024. Even though an expected moderation of global commodity prices should temper cost-of-living increases, tighter policy stances to address elevated inflation and public debt will weigh on domestic demand.

“Meanwhile, weakening growth in advanced economies and China is expected to pose headwinds for external demand, particularly among exporters of industrial commodities.”

It noted that the region was constrained to accessing external financing, adding that tight fiscal space and high borrowing costs were expected to markedly limit many governments’ ability to spur faster growth.

“The modest downward revision to regional growth this year primarily reflects small downgrades for the largest economies.

“Forecast revisions for individual countries are mixed, with downward revisions for almost 60 per cent of countries. This includes downward revisions for over 70 per cent of metal exporters, which are expected to be affected by the further easing of global metal prices.

“In more diversified economies, lower prices of imports are expected to have a stronger positive effect by boosting activity in services and agriculture; nevertheless, for one in three SSA economies, the growth projection for 2023 has been revised down for the second time in a year.”